Important Information from Warwick Financial Solutions Ltd
Auto enrolment: reasons to start early
We look at how you can help employers realise that they must start planning for auto enrolment as early as possible.
3 things to remember
With tens of thousands of employers staging in 2014, it is clear that:
- Employers need to be aware that there is a lot of work to do before their staging date
- Employers will need help and advisers are ideally placed to help employers
- Employers must start planning at least 6 months before their staging date, many will have to start sooner.
Around 38,000 medium-sized employers1 have their auto enrolment staging date next year.
Our experience with auto enrolment so far has thrown up many issues that take time to resolve. That is why every one of those 38,000 employers needs to start planning now.
If they don’t, they will struggle to get the help and support they will undoubtedly need. That could lead to breaches of the rules and ultimately fines from the Pensions Regulator.
All these are based on our actual experience so far but of course every employer will be different; some will need more help than others, and some will need more time than others.
Estimated time: Up to 6 months
One of the most important areas that employers will need to consider is how auto enrolment can be integrated with payroll. Most pension and middleware providers have built auto enrolment systems that rely on payroll extracts. That data might need to be updated and cleansed to make sure that it’s accurate and complete.
Depending on how the auto enrolment pension scheme is set up, employers might also have to check that their payroll provider can calculate contributions based on the qualifying earnings band, or calculate part-month contributions for example.
Some payroll providers also offer auto enrolment systems but it will be important to establish exactly what support they can provide. Getting the data set up correctly and finding out what auto enrolment support payroll providers will offer will take time.
Choosing the auto enrolment system
Estimated time: Up to 6 months
There are now dozens of pension, payroll and middleware providers that promise to deliver some or all of the employer duties in a software package. Advisers can research the market and help the employer decide which provider or providers will best suit their business and payroll processes.
This will take time, especially where multiple providers are involved in any proposed solution.
Sorting out the pension scheme
Estimated time: Up to 4 months
Employers with existing pension schemes will need to make sure that it is “auto enrolment friendly”. This could for example mean that the policy conditions might have to be changed by the provider or the scheme rules might have to be changed. Some legacy contracts may not be suitable for auto enrolment as they live on out of date IT systems so the employer might have to choose a more modern contract for part or all of their workforce.
Some employers will have a legal requirement to conduct a 60 day consultation exercise with employees if they want to change the current contribution rates in an existing pension scheme. Advisers can help with finding out what can and can’t be done but they will need time to do this and weigh up all the options.
Employers with no pension provision will of course need to put one in place.
Leaving it too late could mean that some providers may not be willing to offer terms, restricting employer choice.
There are other things to consider too:
- Does the employer want to introduce salary exchange; and if so, how should this be communicated?
- Are there other changes to the contract of employment that need to be made; and will this need legal advice?
- How much can the employer afford to pay?
- What about the workers who have their own SIPPs?
Our experience so far in helping employers through staging has consistently shown that they underestimate the amount of preparation and time required.
For more information please contact:
Warwick Financial Solutions Ltd, Tel: 01926 400441, email firstname.lastname@example.org